Newsom Asks: Are Things Better in Texas?

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In what has to be the California version of "politics makes strange bedfellows," liberal Democratic Lieutenant Governor Gavin Newsom has gone to Texas with a largely Republican contingent of state legislators to see whether Texas is better than California as a place for job creation.

Newsom and his new best friends may see the same things, but they may not draw the same conclusions.

The reason behind the visit is the belief by some that Texas has added 165,000 jobs over the past three years, while California has lost 1.2 million jobs. There's a problem with this claim. California has lost very few jobs to Texas and other states, according to the Public Policy Institute of California.

But the bulk of the state's losses are jobs that have been sent abroad or hired abroad by California-based companies. Apple, Intel, Hewlett-Packard, Cisco, Disney, Applied Materials, Adobe and Yahoo are a few of the many California corporations that have moved production overseas because the costs are much less than in California. Whether that's good or bad is another question, but the fact is that the overwhelming percentage of these jobs are not going to Texas or any other state.

But there is another side to the Texas visit, namely whether because of its "job-growing" economy the Lone Star state is an example for California revenue and spending. The inference is, if you keep taxes low, the state and its people will prosper. Well, hang on to your Stetson, because things aren't nearly as rosy in Texas as you might expect.

While California has been struggling to patch a $26 billion hole in the state budget, Texas has its own two-year hole of between $14 billion and $27 billion, depending on who is doing the estimating, according to the Austin Statesman newspaper.

Legislators there are on the verge of patching their budget by reducing school funding by $800 per student, something that will result in 108,000 school employees losing their jobs. They also plan massive reductions in health care programs for the needy, elderly and disabled and reductions in Medicaid by 10 percent on top of the three percent they cut earlier this year.

Here's the kicker: According to the Austin Statesman, only about one-third of the shortfall is because of the economic downturn; two-thirds stems from reduced business taxes and a revised school finance system in 2005. In other words the state no longer is collecting enough money to meet existing programmatic needs.

Sound familiar?

All of this brings us back to an all too familiar refrain. When it comes to budgets, you can either raise revenues or cut spending, or come with a combination of each. There's nothing wrong with low tax rates and reduced state spending; after all, no one likes to pay taxes, period. But Texas, like California, has to deal with the reality that if you cut revenues, spending must be cut as well. If Texans and Californians don't see a cost of such decisions, so be it. But there will be a cost, nonetheless.